Time's Running Out for Medicare's Trust Fund

A recent article from MarketWatch brings up an important point: The Medicare trust fund is in trouble, but not for the reasons you might suspect.

The headline is a whopper: Medicare Advantage could get up to $1.6 trillion more [emphasis mine] than it’s entitled to over the next decade, and that will hurt the Medicare trust fund.

Here's a trillion-dollar question--why is Medicare Advantage getting so much money? And why is the federal government promoting this financial insanity?

In theory, Medicare Advantage was meant to demonstrate the private sector's ability to promote competition and lower costs. In practice, that approach has failed over the past two decades. The fact is that healthier Medicare Advantage (MA) members cost the government more per patient than sicker traditional Medicare members on a Per Member Per Month (PMPY) basis.

My perspective is this additional cost is primarily due to coding and risk scoring, and it's no wonder why there are now over 3,000 Part C private insurers cashing in on higher reimbursement rates. Per the MarketWatch article, the Committee for a Responsible Federal Budget (CRFB) believes “these overpayments stem from incentives that lead MA plans to report enrollee diagnoses more completely than physicians billing traditional Medicare. As a result, MA beneficiaries appear sicker than they are relative to traditional Medicare beneficiaries which leads to higher payments."

In short, coding is the culprit here. Using Coding to determine reimbursement enables misleading billing practices that insurers game for their company's gain. As I've argued before, coding is the greatest problem in healthcare (See Code Red Part 2: Improving Healthcare Requires Trade-Offs, Not Solutions).

One might think that draining the Medicare Trust Fund by over a trillion dollars is irresponsible, especially for the sake of a program that was supposed to save money. Being a (Medicare) Trust Fund Baby (Boomer), has me wondering why Medicare and Congress continue to authorize this strategy.

Accepting trade-offs is key to improving healthcare

Here's part two of my interview with 4sight Health, a thought leadership and advisory company. I discuss how real reform will require trade-offs and that it is possible to improve care while reducing spending. To read what I have to say, click here. For more information on how we might reform healthcare, read by book, The Journey's End.

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Poor access to primary care is a real problem

This article highlights an important quote about the importance of primary care to the quality of healthcare:

“A solid and enduring relationship with a primary care doctor - who knows a patient's history and can monitor new problems - has long been regarded as the bedrock of quality healthcare systems.”

The authors go on to illustrate that “enduring relationships” between patients and physicians are virtually extinct in the US. That doesn't mean doctors and patients don’t desire those relationships. Just look at the trend and growth of concierge medicine. This model of care allows for an “enduring relationship” between the patient and the physician. Just ask any patient or physician in a concierge practice if they love it. They do. The only way to get this model of care is to pay $3,500 annually (above insurance premiums) to the physician to make it economically possible to have such a relationship and yet, just about anyone who can afford it buys concierge medicine. Unfortunately, that price tag limits access to less than one percent of the US.

So what does everyone else do? They go to urgent care for access. The article notes that growth in urgent retail clinics has grown 200% over the last five years. These urgent care chains are being set up in national retail pharmacies like CVS. These clinics do offer affordable and accessible care. However, these also are a nice model for promoting prescription sales. Finally, they are seldom connected to the patient's other healthcare providers and consequently promote fragmented healthcare.

Another unfortunate trend identified in the article was the acquisition of primary care practices by corporations. It noted that 48% of primary care practices are no longer owned by the physicians in the practice. The largest owner of these practices is now private equity firms, according to the article. Somehow I do not see private equity firms promoting “enduring relationships.” Unfortunately, primary care physicians are frustrated with the risk and complexity of private practice and have sought refuge in these corporations.

These trends are not good for US healthcare. Sadly, the article did not offer any solutions to these problems. Everyone should have access to concierge medicine without the surcharge. It would improve quality and reduce health costs. If you would like to learn more about the causes and potential solutions to these challenges, I would recommend my new book The Journey’s End.